Coventry City Prepare For League Judgement

It has been a day of drama which in many respects revealed very little for Coventry City. The club’s recent tit-for-tat spat between its hedge fund owners SISU and ACL, who run the stadium that the club had been using for the previous year (but not paying rent to use for more than a year, now) had been threatening to blow up for some considerable time now, with patience on the part of ACL having been worn threadbare by what consistently looked like hard-headed negotiation by the club’s owners. Over the last couple of weeks or so, however, things have got very complicated – complicated to such an extent that we perhaps need to strip this story down to its bare minimum in order to make a great deal of sense out of it.

Every Football League club has a “golden share,” which could be described as its right to play in the Football League in the first place, and golden shares have come a valuable commodity in recent years, with the number of limited companies that have sprung up with the intention becoming the legal entities that would seek to take control of clubs. In the case of Coventry City Football Club, there are two limited companies with very similar names involved – Coventry City Football Club Ltd (CCFCL) and Coventry City Football Club (Holdings) Ltd (CCFCHL). If SISU’s version of events was to be believed, CCFCL were put into administration by them last week but the only thing that this company did, apparently, was to manage the lease with ACL for the use of The Ricoh Arena. The other company, CCFCHL, meanwhile, owned everything else – all other assets, all player registrations and, crucially, that golden share. The right to play in the Football League, in other words.

The case at the High Court was due to be heard on Friday, but was adjourned until today so that the court could get to the bottom of what exactly had been going on with regard to the golden share. This morning, however, ACL requested that the application to force the club into administration had been withdrawn, with the reasoning being that they were now satisfied that the golden share did still lay with this company rather than with CCFCHL, as SISU had previously claimed. Last Friday, Paul Appleton, the administrator appointed by SISU, stated that, “I was pleased to meet with Steven [Pressley, the Coventry City manager] and give him reassurances that, as far as what happens on the pitch and in the general running of the club, it is absolutely business as usual”, but by this evening his tune had changed a little, to say, “CCFC (Holdings) Ltd believe they hold the Golden Share and, as they are not in Administration, should not be deducted 10 points. The Football League believe the Golden Share rests with CCFC Ltd which would potentially mean points being docked. I am continuing my investigation into the matter and, as such, cannot yet comment.”

At this stage, then, the next move lays with the Football League, who are expected to make a statement on the subject in the morning. As we noted previously, when Southampton FC’s holding company went into administration, the club itself was sanctioned because the League found the two entities to be “inextricably linked.” When we stop to consider that CCFCL has no other business interests – that we know of – other than business related to Coventry City Football Club and that the one share that exists in CCFCL is owned by CCFCHL, of all people, it becomes difficult to believe anything other than that these two organisations are similarly “inextricably linked” in a similar way. The club are believed to have already been in talks with the Football League, arguing that they should not being docked the statutory ten points for entering into administration, but it has been suggested that a mere ten point deduction could even end up being the least of Coventry City’s problems.

In the summer of 2007, the Football League refused to grant Leeds United their golden share to allow them to start the new season over their failure to agree a CVA, before initially allowing it with the imposition of a fifteen point deduction for the club for the following season. Luton Town, meanwhile, had already been deducted ten points by the Football Association after being found guilty of misconduct for paying agents via a third party when they were given an additional twenty point penalty when the club’s new owners were unable to agree a CVA to exit administration themselves. It was a ruling that cost the club its place in the Football League, a place that, four years on from the inevitable relegation that followed, it has still been unable to win back.

These examples are not given with the intention of scare-mongering. Indeed, it would be a stretch of the imagination to even suggest that such an outcome would be likely for Coventry City. They are worth mentioning, however, because such sanctions can be applied by either the Football Association or the Football League and because when those sanctions are applied, their word is law. If the Football League was to decide that these two limited companies, these two legal entities, are “inextricably linked” and that there was a deliberate attempt on the part of the club to dump more than a year’s worth of unpaid rent bills on a legal entity that is heading for the “Application to strike off” list at Companies House or similar (the BBC’s Pat Murphy recently stated that, “More than 10 points could be deducted if the Football League rules that placing the subsidiary company into administration was just a ruse, by stating that one subsidiary company was different from another involving Coventry City” – note the use of the word “ruse” there; such language has become increasingly frequent when discussing SISU in recent weeks), then it would be in a position to consider punitive points deductions on top of the mandatory ten point deduction. And then we’re into the sort of territory in which Leeds United and Luton Town found themselves not so long ago.

Whilst the Football League will be the next people to show their hands in this increasingly convoluted story, today at the High Court the score ended in an honorable draw. ACL have the company that they believe to be the one which that holds the Football League’s golden share in administration and have advised that they will be watching the behaviour of this administrator very closely. SISU, meanwhile, have the administrator that they appointed in place rather than the preference of ACL. Other than that, the stalemate remains until the Football League has its say, and it is doubtful that even this will confirm much more than the level of sanction – presuming there to be one; nothing has been announced yet – that the club is to face. Over the last few days, the promotion chances of Coventry City have slipped from fair to extremely unlikely, whilst supporters still don’t know where the team will be playing its next home league match, which s scheduled for Good Friday. The ongoing battle of wills going on behind the scenes at this club is far from over yet.